Argentina sells $1.4 billion in dollar bonds

TaosTurner

BUENOS AIRES--Argentina sold about $1.4 billion in U.S. dollar-denominated bonds to local banks and institutional investors on Tuesday, showing that it can raise money at home even as it remains shut out of global credit markets.

But the sale came at a steep cost, with Argentina paying an interest rate of almost 9% annually on the 10-year bonds, the Economy Ministry said.

That is far more than neighboring countries have been paying to issue debt. Last June, Uruguay paid about half that when it sold $2 billion in bonds. Still, Argentina's economy minister, Axel Kicillof, said he was pleased with the sale.

"This is an important milestone because it had been quite a while since Argentina has tested the market," Mr. Kicillof said during a state visit to Moscow. "There is demand for bonds and investors are willing to invest in Argentina."

The sale comes after Argentina failed to raise much interest in December for an offer to issue $3 billion in debt and swap an even larger amount. Argentina issued just under 10% of the $3 billion that it had hoped to sell at the time.

"I would say that this buries the idea that nobody is willing to lend money to Argentina," Mr. Kicillof said on Tuesday.

The government plans to use the money to fund infrastructure programs.

Argentina hasn't sold bonds abroad since it defaulted on about $100 billion in 2001 amid an unprecedented economic crisis and a mega currency devaluation. Last year, it defaulted on some bonds because of a lawsuit in the U.S. Argentina likely needs to resolve the legal battle before it can return to global markets.

"This is positive news," said Rafael Di Giorno, director of Proficio Investment Management. "The positive thing is that you can raise money in the local market while you can't do it abroad."

But the trend toward higher rates puts Argentina at odds with what is happening in Europe and the U.S., where rates are low, Mr. Di Giorno said.

Argentina depends heavily on funds that it borrows from the national pension agency and the central bank. That funding, however, can also come at a significant cost. Analysts say printing rapidly increasing amounts of cash each year has fueled inflation, which economists say totaled nearly 40% last year and now hovers somewhere around 27% annually.

Though economists laud Argentina's comparatively low debt-to-GDP ratio, they say the cost of funding its ever-expanding spending programs has been double-digit inflation.

"This brings a bit of relief" to the government, said Mr. Di Giorno. "But it's going to be a complicated year with minimal growth. Everything you can do to help like this helps avoid a worst-case scenario where you don't have enough funding toward the end of the year."

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